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What is PMI and how do I avoid it?

By Bob Millaway, South Jersey Community Expert & REALTOR®

Private mortgage insurance (PMI) protects the lender if you default and is required on conventional loans when you put down less than 20 percent. PMI typically costs 0.3 to 1.5 percent of the loan amount annually. You can avoid it by putting down 20 percent, using a piggyback loan, or choosing an FHA loan or a lender-paid PMI option with a slightly higher rate.

Why It Matters

PMI adds to your monthly payment without building equity. Avoiding it saves money, but the right approach depends on your down payment and overall financial picture.

Related Questions

What should I look for during an open house? How much should I save for a down payment? What are closing costs and how much are they? What loan options are available for first-time buyers? What questions should I ask my real estate agent when buying?

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